The Return of Carry?

• NZ dollar interest rate differentials have surged, raising the risk of a return of the ‘carry trade’.

• We find some evidence to suggest Japanese real money flows into NZ bonds are increasing, supporting NZD/JPY.

• But inflows into US and emerging market bonds are far more significant.

• These trends should broadly continue, leaving us comfortable with our assumption rising interest rates differentials won’t drive the NZD through the roof.

Read the full report: FX Research



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